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Chinese coal demand set to peak in 2020

World Coal,

China’s demand for coal is set to peak sooner, rather than later – as new analysis from rating agency Standard & Poor’s (S&Ps) expects the country’s coal demand to peak in 2020.

S&Ps bases the conclusions on the country’s GDP increasing by 7.4% and 7.2% in 2014 and 2015, with coal demand falling to single figures later this decade.

“This is due to the slow shift of the economy toward consumption from capital investments; lower GDP growth; and the Chinese government’s increasing focus on tightening emission standards and moving to more renewable energy sources,” it says.

“Other tangible factors include the low level of fresh water and lack of long-term quality coal resources.”

Shale gas could be a “game changer” says the agency, but significant pipeline infrastructure needs to be installed before the country’s reserves can be fully exploited.

In a report published with Carbon Tracker, S&Ps also warns coal producers that new green policies aimed at addressing climate change could hit growth.

“As governments globally seek to reduce their CO2 emissions, it looks increasingly likely that ‘King Coal’ will lose its crown,” says the report.

“A significant decline in coal production and consumption globally is becoming a much more realistic concept.”

Coal companies in Europe are likely to be hit hardest, with the report dismissing any short-term impacts on coal mining in Indonesia, Vietnam, and Australia.

It says the future of US coal will likely hinge on domestic natural gas prices, boosted by President Obama’s recent move to cap emissions from carbon polluting power stations 30% by 2030 on 2005 levels.

And the agency suggests some coal producers may suffer from the “carbon bubble”, where shifts in international climate laws make their reserves unburnable.

It adds: “The global coal market is in the doldrums, owing to excess supply and fundamental shifts in the US energy mix toward gas and new coal mining projects. Over the long term, coal miners may experience stranded assets as a result of carbon constraints.”

In a statement, Standard & Poor’s credit analyst, Michael Wilkins, said: “numerous factors and their timing” are likely to affect the future of coal as a major energy source.

“Carbon pricing through either taxation or cap and trade emission reduction schemes is among them,” Wilkins said. “We believe new initiatives, such as those made recently by the US and China may flatten the growth in coal demand over the coming years.”

Edited from various sources by Sam Dodson

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